Renault’s loss, Peugeot’s gain in French mega merger

Riley Riley

Remember how Fiat-Chrysler wanted a merger with Renault earlier this year, but the deal fell through?

Well, the French connection has been rekindled, this time with the PSA Group which produces Peugeot and Citroen motor vehicles.

The two companies have announced a 50-50 merger that will create the fourth largest car manufacturing company in the world and the third most profitable too.

With their combined resources it is hoped they will be in a position to capitalise on opportunities in sustainable mobility — in other words electric vehicles.

The spin doctors say the merged entity (no name yet) will be particularly well placed to provide innovative, clean and sustainable mobility solutions — both in a rapidly urbanising environment and in rural areas around the world.

The combined company will have annual sales of 8.7 million vehicles, with revenue of nearly 170 billion euros, a recurring operating profit of more than 11 billion euros and an operating profit margin of 6.6 per cent — based on their combined 2018 financial results.

The strong combined balance sheet will also provide the flexibility and ample headroom to execute strategic plans and invest in new technology.

The combined entity will have a balanced and profitable global presence, with a highly complementary and iconic brand portfolio that covers all key vehicle segments — from luxury, premium, and mainstream passenger cars through to SUVs and trucks and light commercials.

This will be underpinned by FCA’s strength in North America and Latin America and Groupe PSA’s solid position in Europe.

The new Group will have much greater geographic balance too, with 46 per cent of revenue from Europe and the other 43 per cent from North America.

Efficiencies gained from optimising investment in vehicle platforms, engine families and new technologies, while leveraging increased scale will enable the business to enhance its purchasing performance and create additional value for stakeholders.

With an already strong global R&D footprint, the combined entity will have a robust platform to foster innovation and further drive development of transformational capabilities in new energy vehicles, sustainable mobility, autonomous driving and connectivity.

Each company will supply five board members, with John Elkann from FCA as Chairman and Carlos Tavares from Groupe PSA as Chief Executive Officer for an initial term of five years.

Tavares will also be a member of the Board.

There will also be two members representing FCA and Groupe PSA employees.

There’s a lot more detail, but that’s the guts of it.

Completion of the proposed merger is expected to take 12-15 months, subject to customary closing conditions, including approval by both companies’ shareholders — and approval of antitrust and other regulatory requirements.

Chairman of the Managing Board of Groupe PSA, Carlos Tavares, said the merger represented a a huge opportunity to take a stronger position in the auto industry.

“As we seek to master the transition to a world of clean, safe and sustainable mobility and to provide our customers with world-class products, technology and services,” he said.

Chief Executive Officer of FCA, Mike Manley, added: “This is a union of two companies with incredible brands and a skilled and dedicated workforce.

“Both have faced the toughest of times and have emerged as agile, smart, formidable competitors. Our people share a common trait – they see challenges as opportunities to be embraced and the path to making us better at what we do.”

Shake on it . . . Chairman of the Managing Board of Groupe PSA, Carlos Tavares (left) and Chief Executive Officer of FCA, Mike Manley.

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